Leases

12 Months Ended

Feb. 29, 2020

LEASE COMMITMENTS

Our leases primarily consist of operating and finance leases related to retail stores, office space, land and equipment. We also have stores subject to sale-leaseback transactions that did not qualify for sale accounting and are accounted for as financing obligations. For more information on these financing obligations see Note 11.

The initial term for real property leases is typically 5 to 20 years. For equipment leases, the initial term generally ranges from 3 to 8 years. Most leases include one or more options to renew, with renewal terms that can extend the lease term from 1 to 20 years or more. We include options to renew (or terminate) in our lease term, and as part of our right-of-use ("ROU") assets and lease liabilities, when it is reasonably certain that we will exercise that option.

ROU assets and the related lease liabilities are initially measured at the present value of future lease payments over the lease term. As most of our leases do not provide an implicit rate, we use our collateralized incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments. We include variable lease payments in the initial measurement of ROU assets and lease liabilities only to the extent they depend on an index or rate. Changes in such indices or rates are accounted for in the period the change occurs, and do not result in the remeasurement of the ROU asset or liability. We are also responsible for payment of certain real estate taxes, insurance and other expenses on our leases. These amounts are generally considered to be variable and are not included in the measurement of the ROU asset and lease liability. We generally account for non-lease components, such as maintenance, separately from lease components. For certain equipment leases, we apply a portfolio approach to account for the lease assets and liabilities.

Our lease agreements do not contain any material residual value guarantees or material restricted covenants. Leases with a term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term.

The components of lease expense were as follows:



(In thousands)	Year Ended February 29, 2020
Operating lease cost ⁽¹⁾	$	57,656
Finance lease cost:
Depreciation of lease assets	5,769
Interest on lease liabilities	7,678
Total finance lease cost	13,447
Total lease cost	$	71,103

⁽¹⁾Includes short-term leases and variable lease costs, which are immaterial.

Supplemental balance sheet information related to leases was as follows:



(In thousands)	Classification	As of February 29, 2020
Assets:
Operating lease assets	Operating lease assets	$	449,094
Finance lease assets	Property and equipment, net ⁽¹⁾	75,320
Total lease assets		$	524,414
Liabilities:
Current:
Operating leases	Current portion of operating lease liabilities	$	30,980
Finance leases	Accrued expenses and other current liabilities	5,066
Long-term:
Operating leases	Operating lease liabilities, excluding current portion	440,671
Finance leases	Other liabilities	79,327
Total lease liabilities		$	556,044

⁽¹⁾Finance lease assets are recorded net of accumulated depreciation of $9.1 million as of February 29, 2020.

Lease term and discount rate information related to leases was as follows:



Lease Term and Discount Rate	As of February 29, 2020
Weighted Average Remaining Lease Term (in years)
Operating leases	19.98
Finance leases	13.55

Weighted Average Discount Rate
Operating leases	5.40	%
Finance leases	10.32	%

Supplemental cash flow information related to leases was as follows:



(In thousands)	Year Ended February 29, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	57,145
Operating cash flows from finance leases	$	4,027
Financing cash flows from finance leases	$	4,151

Lease assets obtained in exchange for lease obligations:
Operating leases	$	27,136
Finance leases	$	53,111

Maturities of lease liabilities were as follows:



	As of February 29, 2020
(In thousands)	Operating Leases ⁽¹⁾			Finance Leases⁽¹⁾
Fiscal 2021	$	54,577		$	13,053
Fiscal 2022	51,049			13,849
Fiscal 2023	48,441			14,070
Fiscal 2024	47,238			16,729
Fiscal 2025	46,136			12,994
Thereafter	570,667			90,742
Total lease payments	818,108			161,437
Less: interest	(346,457		)	(77,044		)
Present value of lease liabilities	$	471,651		$	84,393

⁽¹⁾Lease payments exclude $36.9 million of legally binding minimum lease payments for leases signed but not yet commenced.

As previously disclosed in our 2019 Annual Report and under the previous lease accounting standard, future minimum lease obligations were as follows:



	As of February 28, 2019
	Capital			Operating Lease
(In thousands)	Leases⁽¹⁾			Commitments⁽¹⁾
Fiscal 2020	$	5,139		$	55,295
Fiscal 2021	6,055			52,142
Fiscal 2022	6,185			48,886
Fiscal 2023	6,288			46,235
Fiscal 2024	5,186			45,067
Fiscal 2025 and thereafter	11,445			595,047
Total minimum lease payments	40,298			$	842,672
Less amounts representing interest	(8,518		)
Present value of net minimum lease payments	$	31,780

⁽¹⁾Excludes taxes, insurance and other costs payable directly by us. These costs vary from year to year and are incurred in the ordinary course of business.

As previously disclosed in our 2019 Annual Report and under the previous lease accounting standard, rent expense for all operating leases was $56.9 million in fiscal 2019 and $52.4 million in fiscal 2018.